The new energy paradigm

November 29, 2017 by Denis Pombriant

One of the more interesting free market responses to climate change has been a reexamination of how we distribute energy. Generally the fossil fuel paradigm is a vertically integrated network of miners and oil producers, retailers and utilities. But we’re moving to a distributed paradigm of energy development and consumption and that’s important.

Solar panels on your roof are a great example. They generate power and send it to the grid or it can be used locally so they straddle a paradigm. The area making the earliest advances in decentralized energy may be the data center, or more precisely the data center that sells its waste heat to a neighbor that needs to warm a building.

Last week The Seattle Times ran a story about how Amazon’s new headquarters would be heated by a 34-storey building near by that houses telecommunications data centers. The arrangement will take waste heat from data centers where it’s not wanted and bring it to where it is needed to heat 4 million square feet of office space and saving 4 million kWh per year.

This is not very high tech and that’s a good thing. It represents some of the low hanging fruit that’s in every city and it’s a short step away from geothermal heating which harvests heat from the earth.

This arrangement is called district heating for obvious reasons and it’s been around since ancient times. The city of Chaudes-Aigues, France has been tapping heat from thermal vents since the 14th century and there is evidence that the Chinese did so much earlier. The Romans were famous for their baths and the city of Bath, UK got its name because the Romans built baths there fed by hot springs.

At any rate, there’s a lot of heat energy available if you know where to look and if you have a use for it. Data centers are prodigious users of electricity, which gets converted into heat. But data centers are not the only heat producers worth contemplating and Amazon is not the only tech company getting into the act.

Facebook is working to produce a district heating system for the Danish city of Odense. That’s for the city, not a few houses. And there’s an effort under way that would develop district heating for most of the UK and save nearly £30 billion in capital costs along the way.

Interestingly, this energy revolution is less about technology than it is about business models and legal processes. Contracts are bringing together willing partners and local governments are lending a hand by cutting red tape or allowing pipes to be run under roads.

What we’re seeing is the commoditization of the energy sector. It sounds strange to say since we’ve mostly thought about energy as a commodity of one sort or another. It’s crude oil or coal or gas or electricity produced to a standard like 120 volts or 87 octane. But by decentralizing energy distribution and letting the free market capture and make various forms of energy we’re moving away from the vertically integrated and highly branded model towards something that’s green, renewable, and good for the planet.

It might not seem like much but this is how revolutions happen. A small group gets an idea and makes it work. Then others copy the success and if you do this enough the world changes.